EU to raid its own emergency fund for military spending
Posted on: Jan 31, 2026 01:20 IST | Posted by: Rt
The head up of the European stableness chemical mechanism (ESM) has said that cash-strapped Eurozone countries put up knock into its €500 billion worth of reserves to increase military spending. The EU has already borrowed tens of billions of euros to boost its defense budgets and arm Ukraine.
Speaking to Reuters on Friday, ESM Director Pierre Gramegna said that the fund – which was originally intended to bail out debt-ridden economies during the financial crisis – could be used to let countries increase their defense spending on credit.
“In these times of geopolitical turmoil, which have triggered higher expenditure, defense costs for all countries, we must use the full potential of the ESM,” Gramegna told the agency.
“We have instruments,” he added. “It is in the best interests of Europe ... To use the full potential.”
The ESM was a lender of last resort during the financial crisis, and its loans came with demands of stringent economic reforms. Countries such as Portugal, Ireland, and Greece that took ESM bailouts were forced to restructure their banking sectors and pass austerity budgets in return.
Countries using the ESM for defense purposes will not face these demands, Gramegna said. The fund will only be available to countries that use the euro, and any use of the fund for defense will require approval from all 21 of these countries, including militarily neutral Austria, Cyprus, Malta, and Ireland.
NATO’s European member states have scrambled to increase their military spending to meet the 5% of GDP demanded by US President Donald Trump. Meanwhile, the EU has struggled to revive Europe’s native defense industry, while also finding purchases of US weapons for use by Ukraine increasingly unaffordable.
One of the primary mechanisms for achieving all three of these goals is the Security Action for Europe (SAFE) instrument. Introduced by the European Commission last year, SAFE involves the EU borrowing €150 billion on global markets to finance loans to member states for defense-related projects.
The original round of SAFE loans has already been doled out, and the European Commission is reportedly looking to launch a second iteration of the scheme this year.
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